2 Political Parties
3 The Crisis of Parliamentarism and the Idea of a Diet Representing Special Groups
4 Liberalism and the Parties of Special Interests
5 Party Propaganda and Party Organization
6 Liberalism as the “Party of Capital”
CHAPTER 5 The Future of Liberalism
APPENDIX
1 On the Literature of Liberalism
2 On the Term “Liberalism”
Index
The term “liberalism,” from the Latin “liber” meaning “free,” referred originally to the philosophy of freedom. It still retained this meaning in Europe when this book was written (1927) so that readers who opened its covers expected an analysis of the freedom philosophy of classical liberalism. Unfortunately, however, in recent decades, “liberalism” has come to mean something very different. The word has been taken over, especially in the United States, by philosophical socialists and used by them to refer to their government intervention and “welfare state” programs. As one example among many possible ones, former U.S. Senator Joseph S. Clark, Jr., when he was mayor of Philadelphia, described the modern “liberal” position very frankly in these words:
To lay a ghost at the outset and to dismiss semantics, a liberal is here defined as one who believes in utilizing the full force of government for the advancement of social, political, and economic justice at the municipal, state, national, and international levels. . . . A liberal believes government is a proper tool to use in the development of a society which attempts to carry Christian principles of conduct into practical effect. (Atlantic, July 1953, p. 27)
This view of “liberalism” was so prevalent in 1962, when the English translation of this book appeared, that Mises believed then that to translate literally the original title, Liberalismus, would be too confusing. So he called the English version The Free and Prosperous Commonwealth. By the following year, however, Mises had decided that the advocates of freedom and free markets should not relinquish “liberalism” to the philosophical socialists. In the prefaces of both the second (1963) and third (1966) editions of his magnum opus, Human Action, Mises wrote that the advocates of the freedom philosophy should reclaim “the term ‘liberal’ . . . because there is simply no other term available to signify the great political and intellectual movement” that ushered in modern civilization by fostering the free market economy, limited government and individual freedom. It is in this sense that “liberalism” is used throughout this book.
For the benefit of readers who are not familiar with the works of Ludwig von Mises (1881–1973), he was for decades the leading spokes-man of the “Austrian” school of economics, so named because Mises as well as his two prominent predecessors—Carl Menger and Eugen von Böhm-Bawerk—were all Austrian born. The cornerstone of the “Austrian” school is the subjective value marginal utility theory. This theory traces all economic phenomena, simple and complex, to the actions of individuals, each undertaken as a result of personal subjective values. On the basis of this subjective value theory, Mises explained and analyzed methodology, value, action, prices, markets, money, monopoly, government intervention, economic booms and busts, etc., making especially significant contributions in the fields of money and economic calculation.
Mises earned his doctorate from the University of Vienna in 1906. His thesis, The Theory of Money and Credit, published in German in 1912 and in English in 1934, was the first of his many theoretical works in economics. During the interwar years, in addition to writing articles and books, such as the powerful treatise, Socialism, Mises worked full time at the Austrian Chamber of Commerce as economic adviser to the Austrian government and taught part time as a Privatdozent (lecturer) at the University of Vienna. He also conducted a private economics seminar for scholars, many of whom became influential worldwide. In 1926 he established the private Austrian Institute for Business Cycle Research which still survives.
After Hitler came to power in Germany, Mises anticipated trouble for Austria. So in 1934 he took a position in Switzerland with the Graduate Institute of International Studies. While there he wrote Nationaloekonomie (1940). Although there were few German readers in national socialist Europe for this monumental economic treatise, Mises’s explanations of sound economic principles have reached a much wider audience through the English-language version of Nationaloekonomie, completely rewritten by Mises for American readers under the title of Human Action (1st edition, 1949).
To escape Hitler-dominated Europe, Mises and his wife left Switzerland in 1940 and came to the United States. His reputation had been well established in Europe, but he was little known in this country. Therefore, he had to begin practically all over again to attract students and readers. English-language books began to appear from his pen—Omnipotent Government and Bureaucracy, both in 1944. And then his masterful economic treatise, Human Action, in 1949. There soon followed Planning for Freedom (1952), The Anti-Capitalistic Mentality (1952), Theory and History (1957) and The Ultimate Foundations of Economic Science (1962), all important books in economic theory.
In 1947, Mises was instrumental in founding the international Mont Pèlerin Society. He lectured widely in the U.S. and Latin America and for 24 years he conducted his well-known graduate economics seminar at New York University. He also served as a consultant to the National Association of Manufacturers and as adviser to the Foundation for Economic Education.
Mises received many honors throughout the course of his lifetime—honorary doctorates from Grove City College (1957), New York University (1963), and the University of Freiburg (1964) in Germany. His accomplishments were recognized in 1956 by his alma mater, the University of Vienna, when his doctorate was memorialized on its 50th anniversary and “renewed,” a European tradition, and in 1962 by the Austrian government. He was also cited in 1969 as “Distinguished Fellow” by the American Economic Association.
Mises’s influence continues to spread among thoughtful persons. His most prominent student from his European days, Nobel Laureate F. A. Hayek, has written: “Mises’s influence now reaches beyond the personal sphere. . . . The torch which you [Mises] have lighted has become the guide of a new movement for freedom which is gathering strength every day.” And one of his leading students in the United States, Professor Israel Kirzner of New York University, has described his impact on modern students: “[T]o the ferment and sense of excitement now evident in the resurgence of interest in this Austrian perspective, Mises’s contributions have been crucial and decisive.”
Mises was always the careful and logical theoretician, but he was not only an ivory tower theoretician. Driven by the logic of his scientific reasoning to the conclusion that a liberal society with free markets is the only road to domestic and international peace and harmony, he felt compelled to apply the economic theories he expounded to government policy. In Liberalism Mises not only offers brief explanations of many important economic phenomena, but he also presents, more explicitly than in any of his other books, his views on government and its very limited but essential role in preserving social cooperation under which the free market can function. Mises’s views still appear fresh and modern and readers will find his analysis pertinent.
Mises’s message, that ideas rule the world, runs as a constant refrain throughout all his books. But it comes through especially strong in Liberalism. “The ultimate outcome of the struggle” between liberalism and totalitarianism, he wrote in 1927, “will not be decided by arms, but by ideas. It is ideas that group men into fighting factions, that press the weapons into their hands, and that determine against whom and for whom the weapons shall be used. It is they alone, and not arms, that, in the last analysis, turn the scales.”
In fact, the only hope of keeping the world from plunging still